In the Streaming Wars Content Matters | 7investing
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In the Streaming Wars Content Matters

February 9, 2021 Advisor: Daniel Kline
Industries: Consumer Discretionary   Consumer Electronics   Entertainment  
Advisor Update Date: February 2021

ViacomCBS (NYSE: CBS) spent more money than any company in history during the Super Bowl to herald the impending launch of its Paramount+ streaming service. That’s sort of like building up to your kids that they’re finally getting the pet they’ve been badgering you for. Is it a puppy? A kitten? No, it’s one of those goldfish you get in a plastic bag at a low-rent fair.

“We’re going to wrap the Super Bowl in surround sound,” said Domenic DiMeglio, ViacomCBS Digital’s CMO. “We really want to make this a moment for Paramount+,” told Adweek.

And wrap it they did. You could not have missed the many, many ads touting the service. The problem — and it’s a big problem — is that ViacomCBS has a sparse cupboard full of mostly second-rate (or worse) intellectual property (IP).

The emperor has no clothes

AT&T‘s (NYSE: T) HBO Max has struggled to get existing HBO customers to convert their subscriptions to the new service. That’s a problem because HBO customers get HBO Max for no additional cost. HBO Max launched with an array of new content and HBO’s reputation for creating noteworthy series. Kaley Cuoco headlined “The Flight Attendant,” which got a fair amount of media coverage and the new Wonder Woman” movie were among the early releases. The new service also had buzzy “Fresh Prince” and “West Wing” reunion specials, original shows in both the Sesame Street and DC Comics universes, and the promise of Time Warner’s full 2021 film slate.

Add in the upcoming Zach Snyder edit of “Justice League,” not to mention a spinoff of “Suicide Squad” starring John Cena and you should have had a big launch. Instead, consumers mostly said “meh,” because Netflix (NASDAQ: NFLX) had set the bar high with volume of new content, and Walt Disney (NYSE: DIS) has set new standards for delivering high-quality shows based on some of the most popular IP in the world.

ViacomCBS spent tens of millions of dollars on the Super Bowl and even more during the runup to the big game showing off its lineup of much-less-compelling IP. You could argue that “Star Trek” is a top-tier TV property, but even its biggest successes have been niche, not mainstream hits. Aside from that, you’re looking at a commercial that showed just how little company has.

The various Super Bowl ads showed off what’s on the network. Aside from the sports and shows that are already on CBS , you got a lot of “Star Trek” characters, a puppet I’m not familiar with, Beavis & Butthead, Dora the Explorer, Spongebob, Snooki from MTV’s “Jersey Shore,” and, well, not much else.

There’s not a single potential “Mandalorian” in the bunch. I don’t even see a possible “WandaVision.” Instead, I see a lot of shows that might do better than the throwaway Disney+ show where the spork from the “Toy Story” series answers people’s questions.

It’s all about IP

Disney owns Star Wars, Marvel, Pixar, its own classic character, and has extra IP like Indiana Jones just lying around. It’s giving its customers shows that continue storytelling or tell new stories in some of the most popular franchises ever. Baby Yoda and “The Mandalorian” became an instant, mainstream hit, and pretty much any major show the company launches will be successful.

To counter that, Paramount+ has questionable original series, and the content you’re already watching on CBS (which can be streamed on a handful of platforms depending upon where you live). Consumers want to see the next chapters in Star Wars and the Marvel universe. Are they really clamoring to see what Beavis & Butthead are up to?

Yes, some people who watch CBS will want this service as part of their cord-cutting offering. In reality, however, a sports fan who wants network television will want a streaming service that gives them all the major broadcast networks because nobody is just a fan of the CBS NFL package or only the golf tournaments CBS has the rights to.

ViacomCBS has tried to make a really big deal out of really unimpressive content. This isn’t Quibi bad, but it’s a worse offering than NBC’s Peacock, which at least has hundreds of bonus hours of Olympics content (at whatever point we have an Olympics). Paramount+ should stop trying to act like it’s going to be a major player. It’s a tier below Disney, Netflix, and even Amazon Prime. It’s also well behind HBO Max and a fair bit worse off than Peacock. That does not mean it won’t find an audience, but that audience will be not that different from the one that paid for CBS All Access.